Crossing Park Ave

Walking back home from work to my place the other day, I realized how I am starting to think all the time in hedge fund related  terms. I already had some weird analytic thoughts before, but I think it’s peaking after entering this industry. Sometimes I unknowingly end up thinking about the smartest way to do some regular things.

Whoever has been in NYC knows that walking around Manhattan is a science. Everyone seems to be racing heartlessly toward their appointments, looking ever busy. So, I found myself unknowingly thinking what the optimal way of crossing the streets was, balancing the risk of getting run over vs. the gain of valuable seconds.

The moment the white light (the equivalent of the EU’s green light) is on, everyone crosses. Following that strategy doesn't give you an edge over the pack in terms of time. However, some people cross while in red at their own risk. This second strategy brings both higher risk and higher returns in the form of seconds. These are both extremes of the spectrum of possibilities.

Nevertheless, the optimal strategy is to cross the street while in red, but closely following a person who already is crossing the street. While vile, this strategy allows you to minimize the risk of getting run over, as cars which see him will slow down by the time you are starting to cross.

In finance, this is the essence of “adding alpha”, as you are gaining excessive returns in compensation of a certain (overstated) risk borne.  These excessive returns arise from what others believe as risky, i.e. jaywalking. And since it is truly not as risky, but you’re still rewarded with a big amount of seconds over the pack, you are adding “free” returns.

It might be weird, but that was what I was thinking about while crossing Park Avenue ahead of the crowd in the NYC heat this Wednesday.

Special offer: Murray Hill apartment

For the past three weeks, I have been living in a spacious room in an apartment that I rented via craigslist. The Korean sub letter was anxious to find a person to live in the room, as he had to move out because he got a puppy and the room was not dog-friendly. Him and his roommate paid $3,000/month for the entire two bedroom condo in the heart of Murray Hill (home to most finance yuppies), so he offered me to have it for $400/week. After some serious bargaining I managed to reduce the price to $1,200/month, with the promise that I would have the whole apartment for myself from the 18^th to the end of June. I guess it is true what they say that “necessity being the worst bargaining companion”.

 

So that is the story of why I am currently living alone in a 500 sq. feet apartment. If anyone is interested in the other room with private closet, bathroom, 42” plasma and two sets of harman/kardon speakers, I’m thinking about subletting it for the special price of a 36-pack of beer/day. Doesn’t sound all too bad, hey?

Just gettin' ready for a crazy weekend... after an even crazier week. Oh well, just ten more hours at the office.

Introduction

I recently got a job to work at a hedge fund in Wall Street. Wall Street, and especially the hedge fund industry, is a very competitive and elitist workplace. As my boss puts it, “everybody fuckin’ bleeds crimson”, referring to the majority of Harvard grads (extensive to other Ivy League colleges).

Essentially, a hedge fund is a managed portfolio that derives its money to invest from wealthy organizations and individuals, who are willing to hand over their money to be managed by more skilled investment specialists. The hedge fund manager allocates the investors’ money to different teams following different investment strategies. Each team has a portfolio manager (PM), an analyst, a trader and – sometimes - a summer analyst. As for me, I am that last person.

The reason why I accepted this job was not the money as many would expect (which is certainly good, with the promise of being obscenely vast in a not so far future), but because of the competitiveness. In these last few weeks, I have been working with and competed against some of the brightest minds in finance, as they all cater around that big grid often referred to as “The Big Apple”.

This blog will reflect on my insights about Manhattan’s lifestyle and -  more particularly, but less profoundly - the hedge fund industry.